General Motors has canceled an estimated $40 million purchase of TV time for the second quarter of 2004.
The timing is noteworthy because GM has 29 new models, redesigns and variants to launch in 2004.
According to executives close to the situation, the nation's largest advertiser will not shift the money to other media or marketing disciplines. The executives said the carmaker is taking the step as a budget-cutting move.
Michael Browner, GM's executive director of media and marketing, declined comment.
GM executives have been encouraging brand managers to shift some of their budgets away from TV and toward areas such as public relations and event marketing.
Gary Cowger, president of GM North America, took a shot at the broadcast TV networks in an evening speech to the Automotive News World Congress last month. "Thirty years ago, this time of night, 90 percent of TV viewers were watching ABC, CBS or NBC," he said. "Used to be TV was the answer. But the old marketing model is dead. ...It stopped working sometime around 1987."
Cowger said the new business model to reach people is "quality of impressions" made on consumers at events that get them into GM vehicles.
Since last June, he said, GM sold 190,000 cars and trucks to prospects who kept them overnight in the automaker's 24-Hour Test
Drive program. That sales rate is nearly 35 percent, or more than one out of every three prospects who participated in the program. That's why GM will continue to do more of that form of marketing.
"Tell me a television commercial or print ad that has that kind of close rate," Cowger said.
But the TV cutback is based primarily on the need to trim costs, the sources said. In 2003, GM's North American earnings fell to $1.2 billion, from $3.1 billion a year earlier.
Another financial factor: GM is spending more on incentives - $3,479 per vehicle last month, compared with $3,074 in January 2003, according to Edmunds.com, an independent auto information site.
Of the $664 million GM spent in measured media in the second quarter of 2003, $182 million went to broadcast TV networks, according to TNS Media Intelligence/CMR. For the same quarter of 2002, the marketer spent $133 million of its total $499 million with the networks.
Jean Halliday is a staff reporter for Advertising Age, a sister publication to Automotive News. Richard Linnett of Advertising Age contributed to this report.